COLORADO STATE UNIVERSITY DEPARTMENT OF AGRICULTURAL AND RESOURCE ECONOMICS Problem Set 3 Agricultural and Resource Economics 412 3.3. Koontz Poll 2H22 Agricultural Commodities Marketing Fundamental Analysis Using Elasticities This problem set is to be an independent effort by a team of two students. Write both names and student ID numbers in the top right-hand comer. Partial credit will be awarded only if you show your work and if the work communicates. Round percent calculations to the nearest tenth of a percent. Round hog and cattle prices [$.-"cwt.} to the nearest cent per cwt.. broiler prices [etlbj to the tenth of a cent per pound. and income to the dollar. This problem set is wordi 50 points. The purpose of this problem set is to use information available from the USDA. in an applied price forecasting exercise. Basic economic tools called elasticities are used with publicly available supply and demand information to forecast futures prices. This procedure is a good starting point for analyzing prices of any non-storable commodity. The focus in this problem set will be on forecasting hog prices. Assume it is June 30. 2022. On June 29, the USDA released the June Hogs arid Pigs report. This report contains information on current and future hog supplies as of June 11 2022. You are interested in forecasting prices of the lean hog futures contracts expiring in late 2U22 and early 2023. A producer might incorporate this information into decisions of whether or not to hedge expected hog marketings or a speculator might use it to decide whether to take a long or short position. The futures contracts you are to forecast prices for are the contracts which will expire during the months of OCTZE, DliIC221 and l-'EBZS. 1. The rst step involves interpreting supply information. information on the following two pages are taken from the USDA ijgs_ar1_d_P_ig_s report. You need to determine which weight groups will be arriving at market during the delivery period of the futures contracts. The following information is available on the hog production process. The average live weight of a finished hog sold in the US. is 295 pounds. After a pig reaches EU pounds. the average rate of gain for hogs on feed is 1.6 pounds per day. Further, there are typically 2 months {ll days) between farrowing (birth of a litter of pigs} and when pigs reach 5U pounds and are ready to go on feed. The USDA Hogs and Pigs report contains the following infomration. The Market Hogs and Pigs numbers are the numbers of hogs, by weight1 which producers plan to market as slaughter hogs. The blows Farrowing numbers list the number of sows which farrowed pigs during the quarters of the production year. A unique and interesting feature of this report is that in it is reported the number of sows which producers intend to farrow in the next two quarters. For example, the June report provides the number of sows producers intend to farrow during the June-August quarter, and during the SeptemberNovember quarter. The market hogs which will be sold for the next year can be estimated from these groups. After die Eggs and Pigs report data is one page from the June release of USDA. Livestock Slaughter" report. Assume that the percent change in slaughter hog weights in the rture will be equal to the percent change in average dressed weight of barrows and gilts between May 2021 and May 2022
